Mr. Eric La Fleche reports

METRO REPORTS 2024 FIRST QUARTER RESULTS

Metro Inc. has released its results for the first quarter of fiscal 2024 ended Dec. 23, 2023.

2024 FIRST QUARTER HIGHLIGHTS

• Sales of $4,974.2 million, up $6.5 per cent
• Food same-store sales up 6.1 per cent, and up 3.4 per cent when adjusting for the Christmas week shift
• Pharmacy same-store sales up 3.9 per cent
• Net earnings of $228.5 million, down 1.1 per cent, and adjusted net earnings of $235.0 million, down 1.1 per cent
• Fully diluted net earnings per share of $0.99, up 2.1 per cent, and adjusted fully diluted net earnings per share of $1.02, up 2.0 per cent
• Declared dividend of $0.3350 per share, up 10.7 per cent versus last year

PRESIDENT'S MESSAGE

"We recorded solid results in the first quarter as our teams continued to deliver good value to customers in all our food and pharmacy banners. Our discount food stores continue to grow their sales at a faster pace, private label penetration reached new heights and our MOI loyalty program now has 2.5 million members, double the size of Metro&Moi. The opening our new 600,000 square feet automated fresh and frozen distribution center in Terrebonne in October was a success and the ramp-up of operations is on track with our plan and the guidance given in November. We are confident that our sustained investments in the modernization of our supply chain and our retail networks will continue to create long term value for our shareholders " , declared Eric La Fleche, President and Chief Executive Officer.

OPERATING RESULTS

SALES

Sales in the first quarter of Fiscal 2024 ended on December 23, 2023 were $4,974.2 million, up 6.5 per cent versus the first quarter of the prior year which ended on December 17, 2022. Food same-store sales were up 6.1 per cent (7.5 per cent in the first quarter of 2023), and up 3.4 per cent when adjusting for the Christmas shift. Online food sales were up 105.0 per cent versus last year (40.0 per cent in the first quarter of 2023), mostly driven by higher partnership sales. Our food basket inflation was about 4.0 per cent, lower than reported CPI and down from 5.5 per cent in the previous quarter. Pharmacy same-store sales were up 3.9 per cent (7.7 per cent in the first quarter of 2023), with a 6.6 per cent increase in prescription drugs and a 1.2 per cent decrease in front-store sales, as we cycled very high sales last year due to an exceptionally strong cough and cold season.

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

This earnings measurement excludes financial costs, taxes, depreciation and amortization.

Operating income before depreciation and amortization for the first quarter of Fiscal 2024 totalled $468.1 million, or 9.4 per cent of sales, an increase of 1.3 per cent versus the corresponding quarter of Fiscal 2023. Last year included gains on disposal of assets of $4.4 million versus $1.2 million this year.

Gross margin for the first quarter of Fiscal 2024 was 19.6 per cent, which is the same percentage as the corresponding quarter of 2023.

Operating expenses as a percentage of sales for the first quarter of Fiscal 2024 were 10.2 per cent versus 9.8 per cent in the corresponding quarter of 2023. The increase in operating expenses is mainly due to the commissioning of our new automated distribution centre for fresh and frozen products in Terrebonne.

DEPRECIATION AND AMORTIZATION

Total depreciation and amortization expense for the first quarter of Fiscal 2024 was $131.1 million versus $120.1 million for the corresponding quarter of 2023. The increase in depreciation and amortization expense is mainly due to the commissioning of our new automated distribution centre for fresh and frozen products in Terrebonne.

NET FINANCIAL COSTS

Net financial costs for the first quarter of Fiscal 2024 were $32.4 million compared with $27.1 million for the corresponding quarter of 2023. The increase is mainly due to an increase in debt, higher interest rates and lower capitalized interest related to our distribution center automation projects.

INCOME TAXES

The income tax expense of $76.1 million for the first quarter of Fiscal 2024 represented an effective tax rate of 25.0 per cent which reflected a favorable tax adjustment in respect of prior years, compared with an income tax expense of $83.7 million and an effective tax rate of 26.6 per cent for the first quarter of Fiscal 2023.

NET EARNINGS AND ADJUSTED NET EARNINGS

Net earnings for the first quarter of Fiscal 2024 were $228.5 million compared with $231.1 million for the corresponding quarter of 2023, while fully diluted net earnings per share were $0.99 compared with $0.97 in 2023, down 1.1 per cent and up 2.1 per cent respectively. Excluding the specific item shown in the table below, adjusted net earnings for the first quarter of Fiscal 2024 totalled $235.0 million compared with $237.6 million for the corresponding quarter of 2023 and adjusted fully diluted net earnings per share were $1.02 versus $1.00, down 1.1 per cent and up 2.0 per cent respectively.

NORMAL COURSE ISSUER BID PROGRAM

Under the current normal course issuer bid program, the Corporation may repurchase up to 7,000,000 of its Common Shares between November 25, 2023 and November 24, 2024. Between November 25, 2023 and January 19, 2024, the Corporation has repurchased 1,675,000 Common Shares at an average price of $67.89, for a total consideration of $113.7 million.

DIVIDENDS

On January 29, 2024, the Board of Directors declared a quarterly dividend of $0.3350 per share, an increase of 10.7 per cent versus last year's quarterly dividend.

OUTLOOK

With the launch of our new state-of-the-art automated distribution centre in Terrebonne, and the launch of the final phase of our automated fresh produce plant in Toronto next spring, we are facing significant headwinds in Fiscal 2024 as we incur some temporary duplication of costs and learning curve inefficiencies, as well as higher depreciation and lower capitalized interest. While these investments position us well for continued long-term profitable growth, we will not fully absorb these additional expenses in the current fiscal year and are forecasting operating income before depreciation and amortization to grow by less than 2 per cent and adjusted net earnings per share to be flat to down $0.10 in Fiscal 2024 versus the level reported in Fiscal 2023. We expect to resume our profit growth post Fiscal 2024 and are maintaining our publicly disclosed annual growth target of between 8 per cent and 10 per cent for net earnings per share over the medium and long term.

CONFERENCE CALL

Financial analysts and institutional investors are invited to participate in a conference call for the 2024 first quarter results at 1:30 p.m. (EST) today, January 30, 2024. To access the conference call, please dial (416) 764-8651 or 1 (888) 390-0620. The media and investing public may access this conference via a listen mode only.

Notice to readers : METRO INC. first quarter of 2024 interim condensed consolidated financial statements and management's discussion and analysis are available on the Internet at www.corpo.metro.ca - Corporate Site - Investors - 2024 Quarterly Results - 2024 First Quarter Results.

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